The Impact of Globalization on the United Arab Emirates Economy - Case Study Example

Nowadays, the world has faced an extremely comprehensive process, which significantly facilitates the growth of the world economy, financial relations among various countries and the overall development of the humanity. This process is called Globalization. It enables different states to encourage outside and inside investment that, in turn, is an essential part of the economic growth and prosperity of the countries. In addition, this process enhances the influx of the work force and adjustment of laws. Globalization improve the labor and business standards that definitely positively influences on the development of all sectors of a country’s economy. For example, The United Arab Emirates is a country, which has experienced all features of positive influence of Globalization during the last 40 years. The country has raised through the ranks from a total desert to one of the most developed and wealth countries in the modern world. The domestic economy and international relations has faced a significant change due to the integration of the word’s interaction. Therefore, this paper is aimed at an investigation and deep analysis with regard the effect of Globalization on the United Arab Emirates economy in order to determinate its role.

Primarily, it would be appropriate to define how and whereby Globalization influences on a domestic economy and overall development of countries. According to Kilic, “Globalization is a process of interaction and integration among the people, companies, and governments of different nations, a process driven by international trade and investment and aided by information technology” (2015). It is obvious that different countries possess some advantages that build their competitive edges. It signifies economic, cultural and political peculiarities that inherent to certain countries. Thus, each country has some kind of excellence in terms of resources, mentality, science and economy.

Besides, any state has an intellectual capital that makes a vast contribution to a country’s prosperity. Hence, it can be concluded that each state is strong and weak in particular sectors of its activity. For instance, the United Arab Emirates possessed a huge amount of various energy carriers the exceeded the county’s needs. Meanwhile, the United States of America has not had enough resources; however, the state has possessed a perfect intellectual capital, which enabled it to develop the most stable and influential economy in the world. Globalization is the process of an interaction between countries, which provides them with an opportunity to exchange needed resources and experience by means of the integration of the world's society so order to meet demand of each state.

Undoubtedly, it is necessary to describe the United Arab Emirates throughout the historical background in order to evaluate the economic progress of the country caused by Globalization. In 1970th, the capital of UAE called Dubai was similar to a vast village in the middle of the desert. Moreover, the country’s level of mortality far outweighed the same metrics even of less developed European countries. Today, “the UAE’s GDP has exceeded 1 trillion dirhams, from 11 billion dirhams in 1973, depicting a rate of economic expansion that has exceeded even that of Singapore. The UAE has the world’s third-highest GDP per capita in purchasing power parity terms” (40 Years of Progress, 2011). Dubai is one of the most developed and popular tourist resort areas. In 2014, the country's GPD per capita was $42,067 and Economic growth was 4.6%. For example, Economic growth of the US, which is considered to the most developed country in the world, was 2,4%. It points at extremely quick rate of the UAE development (United Arab Emirates Economic Outlook, 2016). Furthermore, the country is immensely attractive for foreign investors that, in turn, prompts local capital holders to raise their investment so as not to lose prospective profits. In 2012, the United Arab Emirates faced the investment influx of 13% per year, which is a tremendous number compared to 9,8% of the US. It is needless to say that all these positive incomes and changes were caused by Globalization (United Arab Emirates Economic Outlook, 2016).

Thus, it would be appropriate to explain how exactly and whereby Globalization has affected the United Arab Emirates. Above all, globalization causes a dramatic shift in the economic development by means of the direct impact on four different channels. This variety includes international trade, financial integration, international labor laws, and technical change (Kilic, 2015). To be more specific, the international interaction caused a promotion of Free trade, which has made a significant contribution to the well-being of the UAE as it enables the state to import and export more goods at the appropriate prices. Consequently, import increases the demand on a particular range of goods that, in turn, lead to creation of new working places. “The United Arab Emirates imposes no tariff or taxes on exported goods and five percent tariff on imported goods, not to mention that it has signed several free trade agreements and embarked on negotiations either individually or through the GCC” (Al-Amori, 2007). At this point, Globalization has increasingly intensified the trade activity of the county; thereby, having enhanced its economy.

Undoubtedly, that financial integration is the other significant factor by means of which, Globalization caused prosperity of the UAE. The reason is that an initial domestic activity of the country prompted foreign capitals to be invested in the UAE. To clarify, “the UAE is an important participant in global capital markets through several investment institutions, including, among others, the Abu Dhabi Investment Council, the Dubai Port, Dubai Holding, and the Abu Dhabi’s International Petroleum Investment Co” (Al-Amori, 2007). The investment activity of these institutions, as well as the participation in the global financial markets, provides the country with vast profits, beneficial relations and perfect reputation on the world area. For instance, this engagement of the United Arab Emirates initiated the perspective long-term financial relationships with the United Kingdom and United States of America. Furthermore, the government of the UAE “learn from the UK and USA that savings and investments are the shortcuts toward a faster growth rate as it would increase the production of consumer goods in the future” (Al-Amori, 2007).

In addition, Globalization caused implementing international labor laws in the United Arab Emirates’ legislation. It means that the country improved labor conditions and standards that led to vast influx of cheap foreign workforce from the less developed countries. As a result, the country and business owners has saved a significant amount of money due to the differences in the living standards and salaries. Moreover, the high influx of expats leads to the cultural diversity that definitely is an extremely important for tourist attraction as by this way, the country gradually gets out of the oil dependency. If take into consideration the fact that oil and gas reserves are not eternal, the development of tourism and other fields is necessary for the future prosperity of the state. “For example, the real estate market underwent certain liberalization, which favored the increase of buying land and construction of buildings for hotels, villas and offices” (40 Years of Progress, 2011). Such a tendency is an extremely beneficial for the state in the long-term perspective. In these days, Dubai appears to the architectural marvel. There are located the most expensive and splendid hotels, malls, as well as tourist resorts, that prompt foreign workers from the poor countries to come in order to get a working place, while wealth and influential people admire and desire to extend their activity to the United Arab Emirates.

The last area of Globalization’s influence on the United Arab Emirates is the technical change, which has accelerated the vast majority of commercial and administrative processes in the country. Primarily, the digital progress signifies the appearance of the Internet that vastly change the rules of business dealing, as well as approaches to distribution of commodities, common goods and services. “Even a tiny business today can operate with a dynamically managed supply chain that spans geographies and operates with a global workforce” (Kilic, 2015). As a result, even small entrepreneurs are able to import or export various resources, goods and services; thereby, making a contribution to the increase of annual GDP. In addition, the technical change has improved all spheres of the country’s activity including the development of infrastructure, tourism, supply, consumption and sales. The Internet simplified the working process of the administrative institutions making it easy to implement taxation policy that is a key to the sustainability of the state. Furthermore, the Internet has reduced unemployment as it is considerably easier to work worldwide by means of a computer. It is needless to count the benefits of communication, which the society has got from the Internet. Eventually, technical change has positively affected manufacturing by means of the enhancement and accelerating of the vast majority of production processes.

According to the facts that represented above, it becomes obvious that Globalization caused a sharp development of the United Arab Emirates economy by means of international trade, international labor laws, financial integration, and technical change. Analyzing the main economic metrics, it would be appropriate to say that GDP of the country has increased tenfold that directly points at the equal growth of the domestic economy. Moreover, the high investment rate signifies that the state would face the same pace of development in the forthcoming years. In addition, the country has enhanced various economic sectors of manufacturing and services. It gradually reduces the dependence of the state on oil and gas. Along with an involvement of the cheap foreign workforce, these factors would exceedingly intensity the prosperity of the United Arab Emirates. Hence, Globalization had provided the UAE with an unbelievable positive impact.

In conclusion, the paper represented the investigation and deep analysis with respect to the impact of Globalization on the United Arab Emirates economy. There was identified that Globalization has made a vast contribution to the development of the domestic marketplace, caused a tremendous economic growth, as well as enhance the majority of commerce process in the country. The process of international interaction has affected the economy of the United Arab Emirates by means of four essential channels’ improvement. It signifies international trade, international labor laws, financial integration, and technical change. Therefore, GDP of the country has increased tenfold while the economic growth and the influx of foreign work force raise every single year. The high investment rate forecasts the successful and sustainable future for the United Arab Emirates. Thus, it can be concluded that Globalization provided the country with the extremely positive outcomes.